Tesla Motors Inc. (TSLA) has ventured into the lion’s den by opening a showroom in Michigan. The company opened a 700-square-foot showroom in a Nordstrom department store in Troy, a suburb of Detroit. The showroom is meant to showcase Tesla cars and educate customers about their features. The cars are marked with “Not For Sale” signs because Tesla cannot sell its cars in Michigan.
Michigan is home to America’s biggest car companies, all of which are Tesla competitors. They have made it difficult for the electric car company to sell its products there. Direct car sales, the mode by which Tesla sells its cars, are banned in Michigan, per a 2014 law. Instead, the Michigan Automobile Dealers Association, an organization that is a fierce critic of Tesla, is the interface between manufacturers and customers. (See also: Tesla Files Suit Against Michigan Governor To End Ban).
For its part, Tesla has mounted a vigorous legal challenge to the ban. The company applied for a dealership license earlier this year. However, Michigan rejected the license because the state’s law requires a bona fide contract between a manufacturer and dealer, both of which should be separate entities. In turn, Tesla has taken the state to federal courts and asked judges to invalidate the ban on direct sales in the state. To get around Michigan’s laws, Tesla owners have also formed an association to provide test drives to potential customers. As this Fortune article makes clear, Tesla has also made economic contributions to Michigan. For instance, it acquired supplier Riviera Tools and not made a single layoff after the acquisition.
In addition to blocking Tesla from selling electric cars in Michigan, U.S. car giants are also competing with Tesla in its markets. For example, General Motors (GM), which is headquartered in Detroit, beat Tesla to the punch in releasing a mass-market electric car, when it is released the Chevy Bolt earlier this year. (See also: General Motors Fixes The Price Of Chevy Bolt At $37,495). Tesla’s first mass-market electric car, Model 3, is expected to go into production next summer.